The U.S. Treasury Department this week convened several financial industry executives in an effort to better understand the risks and benefits of more stable cryptocurrencies in the foreign exchange market, whose use in the country is experiencing tremendous growth.
Reuters citing three people who knew directly about these meetings, said that in Washington lawmakers “are alarmed” by the rapid expansion they observe in the cryptocurrency market. In April, trading volume set a new record of $2 trillion.
The market capitalization of stable cryptocurrencies stood at $125 billion closings the week, according to data provided by CoinMarketCap. U.S. financial regulators are trying to better understand the risks and opportunities that cryptocurrencies bring to the financial system.
It is not yet known what kind of regulations might apply to digital assets, due to the fact that they are new products. Financial agencies are planning to issue reports related to the topic in the following months, the sources disclosed.
Likewise, the Senate passed the Infrastructure Bill in early August that included guidelines about tax regulation of Bitcoin. The government is looking to get significant input from the crypto market to fund infrastructure work it will put in place.
It is clear that the government is seeking to accelerate the regulatory process for stable currencies. This is the conclusion drawn by analysts after revealing the holding of this meeting between Treasury officials and representatives of the financial industry.
One of the questions asked by the officials was about the need for direct supervision of stable currencies if they become more popular, said two of the people interviewed.
It was also discussed how regulators should minimize the risks related to cashing stable coins if many people do it simultaneously. Also whether major stable cryptocurrencies should be backed by traditional assets.
The officials further inquired about how stable coins should be structured and about their use. They asked whether the current regulatory framework is sufficient for them to operate smoothly and about issues related to the security and robustness of the blockchain network, one of the sources said.
Treasury will release a report in the coming months
Earlier in the week, Treasury officials also held meetings with representatives of banking and financial guilds with whom they discussed the same issues, one of the people consulted specified.
However, the officials apparently sought to gather information and not to share opinions about how the government intends to regulate stable currencies, the source said.
The information gathered in this series of meetings is expected to inform the Treasury’s planned to report on stable currencies in the near future.
The Treasury Department is analyzing “the potential benefits and risks of stable currencies to users, markets or the financial system,” said agency spokesman John Rizzo.
“As this work continues, the Treasury Department is meeting with a wide range of stakeholders.” That includes individuals and consumer advocacy institutions, members of Congress, and market operators,” he added.
Lawmakers’ fears over cryptocurrencies
The concern of Washington lawmakers is that the rise of privately operated digital money without government control will end up undermining the financial and monetary system. Aside from raising systemic risks, fueling financial crime, and ending up hurting investors.
The U.S. Securities and Exchange Commission (SEC) has tightened the scrutiny of the SEC. (SEC) has tightened scrutiny against decentralized platforms (DeFi), which are placing financial products on the market. This week, it issued a demand warning against cryptocurrency exchange Coinbase Global Inc. (COIN).
Weeks earlier the New Jersey government had banned cryptocurrency platform BlockFi Inc from continuing to offer interest-bearing accounts. Such accounts have become very popular with investors and have raised just over US$14.7 billion.
One in 10 people surveyed in the United States said they are investing in cryptocurrencies, a Momentive Invest in You survey from August found. The survey also revealed that 31% of digital asset investors entered the crypto market in the past year.
The survey, which was administered between August 4 and 9 of this year to 5,523 U.S. adults, found that 45% of respondents to be investors. A quarter of the investors surveyed said they had started investing in digital assets in the last 18 months. While 73% indicated having done so in 2019 or earlier.
Both the U.S. Federal Reserve, the Commodity Futures Trading Commission, and the Office of the Comptroller of the Currency are also working on cryptocurrency regulation and issuance projects, sources said.